May 29 (Reuters) - Missouri should fund and operate its own drug laboratory to mix lethal injections for executions, a move that could help circumvent the problems it and other states are having obtaining the drugs they need, the state's top prosecutor said on Thursday.

Setting up a state laboratory would take compounding pharmacies out of the system, and eliminate the secrecy about where lethal injections drugs are coming from, said Missouri Attorney General Chris Koster.

"As a matter of policy, Missouri should not be reliant on merchants whose identities must be shielded from public view or who can exercise unacceptable leverage over this profound state act," Koster said in a speech to Bar Association of Metropolitan St. Louis conference.

Missouri is one of several states wrestling with how to proceed with executions amid a shortage of the drugs traditionally used. The shortfall has emerged as pharmaceutical manufacturers have grown reluctant to allow their drugs to be used for executions.

The problems obtaining lethal drugs have caused states to change the chemicals used, and to seek out chemicals from compounding pharmacies, which have been only lightly regulated by states and the federal government. The use of these pharmacies has been the subject of several legal challenges in Missouri and elsewhere.

The compounding pharmacies also typically do not want it publicized that they are involved in providing the execution drugs, and states like Missouri have refused to reveal where they get the drugs they use in lethal injections.

But lawyers for inmates have challenged the secrecy of the drug suppliers in court, arguing that the drugs being combined and the protocols used could be subjecting inmates to illegally tortuous deaths.

A U.S. federal judge on Tuesday ordered a halt on all executions in Ohio until the middle of August, to allow condemned inmates there time to prepare legal challenges to the state's plan to increase the dosages of drugs used when administering lethal injections.

That ruling followed a lengthy Ohio execution in January that used a never-before-tested combination of two drugs which the state now plans to use in increased dosages.

The halt in Ohio also follows a botched execution in Oklahoma last month that brought renewed scrutiny to lethal injection, the preferred method of execution in the United States.

In his remarks on Thursday, Koster said that carrying out a death sentence is a daunting state responsibility that should be done with transparency. He also said that while it is legal to keep secret the identity of the compounding pharmacies involved, "it may not be prudent."

"Eliminating outside business interests from Missouri's execution protocol would improve the high level of public transparency that is demanded in the exercise of this extraordinary state power," Koster said.

Richard Dieter, executive director of the Death Penalty Information Center, which tracks executions nationwide, said he knows of no state that mixes its own lethal drugs.

"It seems like a possibility, but defense attorneys would raise the same questions they do now," Dieter said. (Reporting by Carey Gillam in Kansas City, additional reporting by Kevin Murphy in Kansas City; editing by G Crosse)